Tuesday, 18 September 2012

The Global Food System Casino

Food is our nourishment. It is the source of life. Growing food, processing, transforming and distributing it involves 70 per cent of humanity. Eating food involves all of us. Yet, it is not the culture or human rights that are shaping today’s dominant food economy. Rather speculation and profits are designing food production and distribution. Putting food on the global financial casino is a design for hunger.

After the US subprime crisis and the Wall Street crash, investors rushed to commodity markets, especially oil and agricultural commodities. While real production did not increase between 2005-2007, commodity speculation in food increased 160 per cent. Speculation pushed up prices and high prices pushed an additional 100 million to hunger. Barclays, Goldman Sachs, JP Morgan are all playing on the global food casino.

A 2008 advertisement of Deutsche Bank stated, “Do you enjoy rising prices? Everybody talks about commodities — with the Agriculture Euro Fund you can benefit from the increase in the value of the seven most important agricultural commodities.”When speculation drives up prices, the rich investors get richer and the poor starve. The financial deregulation that destabilised the world’s financial system is now destabilising the world food system. The price rise is not just a result of supply and demand. It is predominantly a result of speculation.

Between 2003 to 2008, commodity index speculation increased by 1,900 per cent from an estimated $13 billion to $260 billion. Thirty per cent of these index funds are invested in food commodities. The world commodity trading has no relationship to food, to its diversity, to its growers or eaters, to the seasons, to sowing or harvesting. Seasons are replaced by 24-hour trading. Food production driven by sunshine and photosynthesis is displaced by “dark pools of investment”. The tragedy is that this unreal world is creating hunger for people in the real world.

Gambling on the price of wheat for profits took food away from 250 million people. Speculation had separated the price of food from the value of food. Food is an ecological experience, a sensory experience, a biological experience. With speculation grain markets have been transformed, with futures trading by the grain giants in Chicago, Kansas City and Minneapolis combined with speculation by investors. And as Mr Kaufman says, “Imaginary wheat bought anywhere affects real wheat bought everywhere.” So if we do not decommodify food more and more people will be denied food; as more and more money is poured into the global casino.

In India, the prices of onion jumped from Rs. 11/kg in June 2010 to Rs. 75/kg in January 2011. While production of onion had gone up from 4.8 million tonnes in 2001-2002 to 12 million tonnes in 2009-2010, prices also went up, showing that in a speculation-driven market there is no correlation between production and prices. The price difference between wholesale and retail was 135 per cent.

Food that has been put on a global casino is serving speculative investors and agribusiness well, but it is not serving people. We need to get food off the global casino and back on people’s plates. Food democracy and food sovereignty can only be achieved by putting an end to financial speculation.When it comes to food, the margins between stability and chaos are perilously thin. Volatility on the markets can translate quickly to volatility on the streets and we all should remain vigilant.”

The growing concern about speculating on food has forced some banks to stop investing in food commodities. Germany’s Commerzbank and Austria’s Volksbanken have both removed agricultural products from their index fund products. Deutsche Bank had earlier done the same. It is time that every government and every financial institution put people’s right to food above the hunger for profits.[Abridged]

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About Me

I am not an academic. I have been a commercial beekeeper in New Zealand for most of my working life, except for four years in detention as a conscientious objector during WW2. Those years were particularly formative for me. I have retained my horror of war and the suffering still being caused by armed conflict and violence in so many places. My convictions have been nurtured by my Methodist church connection, though my pacifism has been deplored by some good people.

Expect no slick answers here; I am still a searcher myself. How can a just and peaceful society develop from this chaos, and what are the obstacles in the way?

Most of the articles posted here are from other sources. I look for writers, wherever they can be found, who can throw light on what is happening in our world. If you would like to learn a little more about myself, please read this biographical interview series conducted by my granddaughter, Kyla.